Entry into India & Economic Liberalization
McDonald’s restaurant in Delhi
In 1996, McDonald's opened in India for the first time, a country where the majority of the population was Hindu and vegetarian, and the cow was sacred. Many saw it as just another example of the relentless spread of Western corporations into every nation, creating a global system in which wealth was drained out of local economies into the hands of a very few, very rich elite. McDonald’s opened its doors in India in October 1996, demonstrating what the McDonald’s experience was all about. McDonald’s in India was a 50-50 joint venture partnership between McDonald’s Corporation (U.S.A.) and two Indian businessmen. Amit Jatia’s company, Hardcastle Restaurants Pvt. Ltd., owned and operated McDonald’s restaurants in Western India, while Connaught Plaza Restaurants Pvt. Ltd., headed by Vikram Bakshi, owned and operated the North Indian operations.
The entry of McDonald’s in India was perfectly timed. The market had begun to open up. The economy of the country was growing stronger. The customer markets were eager to acquire newer products and use newer forms of services. Foreign brands were valued and perceived to be superior in quality. According to a report of AC Neilson, among the world’s consumers, Latin Americans and Asians were the biggest supporters of globalisation and the value that it added to the various aspects of their lives. It was a favourable situation for McDonald’s because at the time when they entered, India, the Asian Tiger was awakening to the global call. The Indian customer was enthusiastic about the market situation which provided them with numerous choices to choose and pick.
Indian companies for their operational convenience had divided the Indian subcontinent into four zones, the progressive West, the powerful North, the traditional and culturally rich, South and East. McDonald’s opened their first restaurant in the capital of India which is Delhi. The second restaurant was opened in the financial capital of India, Mumbai. McDonald initially concentrated in the West and North regions. Later the company exhibited ambitious plans for expansion in Eastern and Southern regions.
Earlier (pre 1990) the entry & exits in sectors were controlled by government. There were a lot of MNC restrictions. Even after the deregulation the socialist & swadeshi mindset continued for the Indians. They were not used to the western products & commodities. MPs used to comment on the MNC in consumer sector, saying “We want computer chips & not potato chips”. Although other food retail chains like KFC & Pizza Hut entered into the Indian Market in early 1990s, but McDonald took its time, studied the Indian market, did researches and then entered strategically. It was only after five years of preparation, that the first restaurant became operational in 1996. It worked on developing local relationships with local partners to facilitate the raw material.
Indian Food Industry/Market
India as a market was a unique example of diversity. Divided into 28 states and 7 union territories, the vegetation, climate, religion, language, clothing, and food varied from one state to another. With the combination of spices in a unique way, food of these states reflected their traditions and culture. Hence the biggest challenge to any food business in India definitely was about balancing the diversity and the product offerings.
India’s food expenditure was $77 bn out of the total of $4000 bn the world’s food expenditure, which amounts to nearly 2%. The food industry was highly fragmented with millions of roadside stalls & carts who hold the major market share. Regional tastes vary in terms of products like Udipi, Sandwich, PavBhaji, Chaats, Chinese,Namkeens, Pizza, etc. There were organized chains like Nirula’s , Wimpys & Udipis.
Local food retailers: The competition from the local food retailers was intense. The food...
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